ANZ Banking Group
managing director
Mike Smith
has blamed short-term performance targets used by fund ­managers for stifling investment in agriculture and called for the government’s financial services inquiry to examine the issue.

Mr Smith said Australian fund ­managers were not willing to invest in agriculture despite the sector needing up to $600 billion in additional investment by 2050.

“You would expect them as [representatives of] super­annuation funds to invest in long-term assets like agriculture. But they are not, because the way it has been set up is that you look at the performance on a quarterly basis," Mr Smith told a Perth business lunch.

“What is the point of looking at a 30-year asset on a quarterly basis? It’s rid­iculous but they all do it. So therefore they are almost corralled into the equity market – because that is where they will get the return – or the bond market. Maybe the financial services inquiry should have that on its agenda. I’ll try and put it on," he said.

Mr Smith’s comments coincided with a Federal Court decision that found late-fee penalties on ANZ credit cards were illegal. The court found other fees and charges were not penalties for consumers. Mr Smith said he was “pretty pleased" with the result but would not comment because he had not read the judgment. “I just got off a plane so I haven’t read the thing," Mr Smith said. “All I know is that we won four out of five so I am pretty pleased."

He also welcomed the Abbott government’s willingness to listen to views and ideas from business, a change from the “bitter experience" with the prev­ious Rudd and Gillard governments.

But he warned the Coalition government needed to start delivering economic reforms and was critical of Treasurer
Joe Hockey
’s decision to block Archer Daniels Midland’s proposed $3 billion takeover of
GrainCorp
.

“The decision not to approve the ADM takeover of GrainCorp was hard to understand," Mr Smith said.

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‘Jury still out’ on 2014

He said it was important Australia continued to attract investment. “The fact that it used to come from the United States, Europe, Britain and New Zealand to an extent was really just a reflection of those trade patterns, and indeed investment normally follows trade.

“It is quite understandable that now the pool of capital will be [from] China, Japan, Korea, Indonesia, Malaysia, Thailand etc. I don’t think it is something we should be worried about. Well, unless it doesn’t come."

Mr Smith urged the government to move quickly to reform the economy.

“A rapid shift from listening to acting is now urgent given the absence of meaningful economic reform over the past decade and, to be frank, by the fiscal mess created over the past few years," Mr Smith said.

He said the need for reform was “more urgent" because of an “enormous gap" left by the previous Labor minority government, but was concerned the Abbott government could take too long to act. “It does seem the ground is being prepared so that we should not expect the numerous inquiries and reviews under way will result in meaningful reforms until the next term of government," Mr Smith said.

He said the “jury was still out" on whether he was optimistic about the year ahead.

Mr Smith wants the tax system changed to encourage business investment and entrepreneurs, and to better commercialise research and development in industries such as agriculture.

“There does need to be an improvement in our tax system," Mr Smith said. “It has been established for last century’s economic models. We have something called payroll tax, so we pay more tax for everybody you employ? What sort of logic does that have? It is a crazy system."